Tesco is facing new allegations that it set up complex structures to avoid corporation tax.

The magazine Private Eye last week published claims that Tesco had set up a financing arm in the Swiss canton of Zug.

The arm helps finance the supermarket's international business. Tax is paid on the interest on the loans it provides at a lower rate in Zug than it would be in the UK, saving Tesco £16m, the magazine said.

Tesco was quoted saying: 'This partnership is used to fund our overseas business. It is common practice for global businesses operating in other markets to fund development in similar ways. We have an open relationship with HMRC and discuss our tax arrangements and planning with them on an ongoing basis. We believe this structure is compliant with the government's controlled foreign companies legislation.'

Tesco is suing The Guardian over reports in that paper that it had avoided up to £1bn in corporation tax through a Cayman Islands structure.

The paper reported the latest allegations at the weekend, with Tesco saying: 'The Guardian has already admitted a serious libel against Tesco after the last time it conducted an inept investigation into our tax affairs. It appears from these further allegations that the paper is waging a vendetta against Tesco in order to, somehow, justify this earlier libel.

'The truth is that Tesco pays a disproportionately high amount of tax in the UK - around £1bn a year including corporation tax, business rates and employer's NIC. As well as being materially inaccurate, the continued attempts to portray Tesco as a business devoted to avoiding UK tax are wholly and deliberately misleading.

'The legal case against the Guardian is ongoing which limits what we can say, but the information put to us continues to show a complete lack of knowledge when it comes to tax. It is also riddled with inaccuracies and designed to portray as unethical what is in fact entirely legitimate and commonplace funding of international companies by successful global businesses based in Britain.'

Further Reading:

Read the Guardian story